IPA launches new ROMI calculator

The IPA’s new ROMI online calculator, launched today (11th April 2014), will help agencies and clients work out the financial payback and the profit generated from their marketing activity.

16/04/2014

The ROMI calculator has been developed following IPA research* which suggests that less than 20% of marketing activity is evaluated in terms of financial payback, despite the fact that profit is often the ultimate motive for commercial firms.

While the calculator provides the means to calculate ROMI (the financial measure which provides the ratio of profits generated by marketing investment), the accompanying best practice guide on effectiveness provides step-by-step advice on working out the essential metrics for this calculation, as well as useful case history examples from the Gold and/or Grand Prix winning papers from the 2010 and 2012 IPA Effectiveness Awards, including Hovis, Waitrose, Virgin Atlantic and TDA Teacher Recruitment, among others.

In addition to helping clients and agencies in general, it will also be of significant benefit to entrants of the world-renowned IPA Effectiveness Awards which reward campaigns that have proved the commercial power of their ideas and demonstrated their marketing communications payback. (The 2014 IPA Effectiveness Awards competition is open to entries until 30th April.)

It has been created by the IPA’s Value of Creativity Group, which is committed to proving how creativity works as an effective business tool, and has been driven by Group Members Richard Morris, Managing Director, Vizeum, Lucas Brown, Chief Strategy Officer, Total Media and Les Binet, Head of Effectiveness, Adam & Eve DDB.

Says Richard Morris, Managing Director, Vizeum: “We want to promote the value of creativity at the IPA, and this begins with a true understanding of Return on Marketing Investment. We hope the ROMI calculator will support those agency practitioners and clients keen to prove and maximize the commercial value they provide." Read his full blog here.

Says Lucas Brown, Chief Strategy Officer, Total Media: “The ROMI calculator is a user friendly guide to help agencies and advertisers calculate the true profitability of their campaigns and provide inspiration from some of the world best effectiveness papers.”

The calculator and accompanying guide is available to access online at http://romi.ipa.co.uk. It will also be hosted on the IPA’s Effectiveness Hub, a treasure trove of industry learning and insights, where all past IPA Effectiveness Awards papers and case studies are collated and where the IPA posts its thought leadership on effective marketing strategies.

The ROMI calculator was designed by Dare.

*The IPA’s Evaluation Best Practice Guide

*These metrics comprise the incremental net profit generated from the activity (the financial return), versus the cost of the campaign (the investment), for which the guide outlines: how to calculate revenue, how to calculate retailer gross margin, how to calculate the contribution of sales to profit, and how to calculate the net profit.

The ROMI calculator will also be included in the Eff Test, the IPA qualification on effectiveness and measurement for mid-level planners.